I considered adding this to my earlier post about Jon Corzine and Barack Obama, but both the story and its source deserves attention all on its own. The New York Times reports today that Corzine pushed regulators away from a rule change that would have exposed MF Global’s risky and perhaps illegal business practices:
Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.
As a former United States senator and a former governor of New Jersey, as well as the leader ofGoldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.
How did Corzine manage that? It was apparently between the Democrats in the regulatory state:
Leading the government’s effort to curtail these arcane practices was Gary Gensler, the chairman of C.F.T.C., who had worked for Mr. Corzine at Goldman Sachs. Mr. Gensler pushed for the proposed change in October 2010, and planned to bring it to a vote this summer. …
Mr. Corzine’s efforts culminated on July 20, as the agency was preparing for a vote on the proposal. That day, MF Global executives were on four different calls with the agency’s staff. Mr. Corzine himself was on two of those calls.
One of the calls was with Mr. Gensler. Both men are active Democrats, and served on financial panels together recently.
Shortly after the calls, Mr. Gensler, aware that he lacked the support to push the vote through, decided to delay the proposal indefinitely. He did so at the urging of Republican commissioners, according to people familiar with the matter.
Lehman Brothers actually pushed for the existing rule in 2005, which had the unintended effect of allowing firms to use repurchase agreements to hide losses in the short term. That’s how Lehman’s collapsing financial state escaped notice for as long as it did, as they hid billions in losses. That is why Gensler proposed the rule in the first place, but Corzine insisted that the rule change wouldn’t actually do anything for greater transparency on compliance.
Mona Charen notes that this makes Barack Obama’s attack on Republicans look more like a case of projection:
That’s Obama’s caricature of Republicans, whereas under his enlightened leadership, those selfish malefactors are under strict regulatory control. Note then today’s NY Times story (sorry I’m on train and insert link) saying that when regulators were looking askance at MF Global, the influence of Jon Corzine, Democratic poobah, was sufficient to call them off. So much for the regulatory state. Combine this with Solyndra and you get regulation and corruption to spare!
Hey, it’s not as if Corzine didn’t earn his influence in Washington. He got it the old-fashioned way … he bought it. Unfortunately for Democrats, we all still have the receipts.